================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
---------
Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended March 31, 1996
Commission file number 0-19674
SYQUEST TECHNOLOGY, INC.
(Registrant)
DELAWARE 94-2793941
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
47071 Bayside Parkway
Fremont, California 94538
Telephone: (510) 226-4000
---------------------------------
(Registrant's principal executive
offices and telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
---------------- ----------------
As of March 31, 1996, 11,402,664 shares of the Registrant's common stock, $0.001
par value, were issued and outstanding.
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<PAGE>
INDEX
SYQUEST TECHNOLOGY, INC.
PART I FINANCIAL INFORMATION Page
no.
Item 1. Consolidated Condensed Financial Statements (unaudited)
Consolidated condensed statements of operation--Three and six
months ended March 31, 1996 and March 31, 1995................... 3
Consolidated condensed balance sheets--March 31, 1996
and September 30, 1995........................................... 4
Consolidated condensed statements of cash flows--Six
months ended March 31, 1996 and March 31, 1995................... 5
Notes to consolidated condensed financial statements--
March 31, 1996................................................... 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 9-14
Part II OTHER INFORMATION
Item 1. Legal proceedings................................................ 15
Item 4. Submission of Matters to a Vote of Securities Holders............ 15-16
Item 5. Other Information................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................. 16
SIGNATURES............................................................... 17
<PAGE>
<TABLE>
SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three months ended Six months ended
March 31, March 31,
--------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 47,445 $ 76,490 $ 126,112 $ 142,382
Cost of revenues 69,003 55,030 149,093 104,995
Provision for losses on purchase commitments 3,833 -- 11,672 --
--------- --------- --------- ---------
Gross Profit (loss) (25,391) 21,460 (34,653) 37,387
Operating Expenses:
Selling, general and administrative 14,351 10,826 28,815 19,413
Research and development 7,360 6,095 14,520 11,270
Restructuring costs 3,600 -- 3,600 --
--------- --------- --------- ---------
Total operating expenses 25,311 16,921 46,935 30,683
--------- --------- --------- ---------
Income (loss) from operations (50,702) 4,539 (81,588) 6,704
Net interest income (expense) (403) 311 (318) 676
--------- --------- --------- ---------
Income (loss) before income taxes (51,105) 4,850 (81,906) 7,380
Provision for income taxes -- 1,164 3,000 1,771
--------- --------- --------- ---------
Net income (loss) ($51,105) $ 3,686 ($84,906) $ 5,609
========= ========= ========= =========
Income (loss) per share:
Net income (loss) ($4.49) $ 0.31 ($7.48) $ 0.47
========= ========= ========= =========
Common and common equivalent shares
used in computing per share amounts 11,371 11,838 11,351 11,864
========= ========= ========= =========
<FN>
See notes to consolidated condensed financial statements
</FN>
</TABLE>
<PAGE>
SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 31, September 30,
1996 1995
----------- -------------
Assets (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 7,273 $ 29,248
Short-term investments 400 400
Accounts receivable 42,893 55,653
Inventories 40,079 34,213
Prepaid expenses and deposits 3,597 2,066
Deferred income taxes 10,254 13,254
--------- ---------
Total current assets 104,496 134,834
Property, equipment and leasehold improvements 62,544 57,790
Accumulated depreciation (29,274) (31,070)
--------- ---------
Net property and equipment 33,270 26,720
Other assets 3,012 3,130
--------- ---------
$ 140,778 $ 164,684
========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 77,126 $ 41,213
Income taxes payable 860 355
Accrued compensation 5,046 5,206
Accrued expenses and other liabilities 18,561 15,210
Provision for losses on purchase commitments 14,237 10,510
Notes payable to bank 17,494 --
--------- ---------
Total current liabilities 133,324 72,494
Deferred rent 252 276
Deferred income taxes 8,725 8,726
Stockholders' equity (deficit):
Common stock 13 13
Additional paid in capital 79,684 79,489
Treasury stock (12,855) (12,855)
Retained earnings (deficit) (68,365) 16,541
--------- ---------
Total stockholders' equity (deficit) (1,523) 83,188
--------- ---------
$ 140,778 $ 164,684
========= =========
Note: The consolidated condensed balance sheet at September 30, 1995 has
been derived from the audited financial statements at that date.
See notes to consolidated condensed financial statements
<PAGE>
SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended
March 31,
-------------------------
Operating Activities: 1996 1995
---- ----
Net income (loss) ($84,906) $ 5,609
Charges to operations not affecting cash:
Depreciation 4,889 3,813
Deferred income taxes 3,000 92
Provision for bad debts 4,035 775
Other 24 108
Net changes in operating assets and liabilities:
Accounts receivable 8,725 (1,266)
Inventories (5,866) (27,792)
Accounts payable 35,913 6,451
Provision for losses on purchase commitments 3,727 --
Other 2,164 (268)
-------- --------
Net cash used in operating activities (28,295) (12,478)
Investing activities:
Purchase of equipment and leasehold improvements (11,487) (4,265)
Purchase of short-term investments -- (2,778)
Proceeds from the sale of short-term investments -- 4,493
Investment in Silmag -- (1,913)
Other 118 (572)
-------- --------
Net cash used in investing activities (11,369) (5,035)
Financing activites:
Proceeds from issuance of common stock 195 1,557
Proceeds from short-term borrowings 17,494 --
Purchase of treasury stock -- (1,200)
-------- --------
Net cash provided by financing activities 17,689 357
Net decrease in cash and cash equivalents (21,975) (17,156)
Cash and cash equivalents at beginning of the period 29,248 45,982
-------- --------
Cash and cash equivalents at end of the period $ 7,273 $ 28,826
======== ========
See notes to consolidated condensed financial statements
<PAGE>
SYQUEST TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
NOTE: 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included.
Operating results for the three and six month periods ended March 31,1996 are
not necessarily indicative of the results that may be expected for the year
ending September 30, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended September 30, 1995.
NOTE: 2 - INVENTORIES
Inventories are comprised of the following: March 31, September 30,
1996 1995
---- ----
(In thousands)
Raw materials $ 9,434 $22,258
Work in process 7,454 8,564
Finished goods 23,191 3,391
------- -------
$40,079 $34,213
During the quarter ended March 31, 1996, the Company established reserves of
$12.8 million for excess inventories and non-cancelable purchase commitments for
its 3 1/2 inch drive and system products. In addition, the Company provided $3.1
million in reserves for inventory and tooling due to discontinuance of further
development of the Company's smaller form factor products.
<PAGE>
NOTE: 3 - NET INCOME (LOSS) PER SHARE
Net (loss) per share for the three and six month periods ended March 31, 1996 is
based on the weighted average number of shares of common stock outstanding
during the period. Net income per share for the three and six month periods
ended March 31, 1995 is based on the weighted average number of shares of common
stock and common stock equivalents outstanding during the period.
NOTE: 4 - LINE OF CREDIT
At March 31, 1996 the Company had a line of credit agreement (the "Agreement")
with a financial institution, expiring January 31, 1997. Borrowings under the
Agreement bear interest at the highest "LIBOR" (the one-month London Interbank
Offered Rates) rate during the month plus 4.825% and are subject to the higher
of a minimum interest rate of 8% per annum or $10,000 per month, regardless of
borrowings. The total borrowings are limited to the lesser of $30 million or 75
percent of the Company's eligible accounts receivable. The Agreement places
limitations on additional borrowings and payment of dividends. As of March 31,
1996, approximately $17.5 million of borrowings were outstanding and
approximately $3.0 million was available for borrowing under the Agreement.
In March 1996, the Company entered into a line of credit agreement with a bank
in Penang, Malaysia. The line of credit provides for a term loan equivalent to
approximately US$ 4.2 million and an overdraft facility of approximately
US$840,000. The term loan is repayable in 120 monthly installments and bears
interest at the rate of 1.5% over the bank's base lending rate. The line of
credit is secured by factory buildings owned by SyQuest Technology (M) SDN BHD.
As of March 31, 1996 there were no borrowings outstanding under this line of
credit agreement
NOTE: 5 - INCOME TAXES
No income tax benefit was recorded for the quarter ended March 31, 1996 because
the Company anticipates that deferred tax assets attributed to temporary items
and tax net operating losses arising during fiscal 1996 will be fully offset by
a deferred tax asset valuation allowance. For the six month period ended March
31, 1996, the Company has recorded a $3.0 million provision for income taxes
resulting from an increase in the deferred tax valuation allowance in the first
quarter. The Company recorded a provision for
<PAGE>
income taxes for the three and six month periods ended March 31, 1995 at an
effective rate of 24%. The effective tax rate was less than the statutory rate
primarily because operating income of certain foreign operations was not subject
to foreign income taxes and a portion of such operating income was considered to
be permanently invested in non-U.S. operations.
NOTE: 6 - STOCKHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
Shares Outstanding
---------------------------------
March 31, September 30,
1996 1995
---- ----
Preferred Stock $0.001 par value,
4,000,000 shares authorized -- --
Common Stock $0.001 par value,
20,000,000 shares authorized 11,402,664 11,323,974
NOTE: 7 - RESTRUCTURING COSTS
The accrual for restructuring costs represents direct costs related to exiting
manufacturing facilities in Singapore. During the second quarter of 1996, the
Company developed and began implementation of a plan to relocate the
manufacturing capabilities in Singapore to Penang, Malaysia. The Company
anticipates that the transition of manufacturing operations from Singapore to
Malaysia will be completed in the third quarter of 1996. The reduction in force
will affect approximately 1500 employees, primarily in the manufacturing and
administrative functions.
The Company accrued $1.6 million for write-off of capital assets as well as $2.0
million for severance compensation and other benefits for the affected employees
and for the closure of Singapore facilities.
NOTE: 8 - LITIGATION
See Part II, item 1, of this Form 10-Q for a description of pending legal
proceedings.
<PAGE>
SYQUEST TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Net revenues for the quarter ended March 31, 1996 were $47.4 million, a decrease
of 38% from the $76.5 million reported for the comparable year-ago quarter. In
the fourth quarter of fiscal 1995 the Company introduced the EZ135 system, which
was targeted for the "SOHO" (small office, home office) market and sold into the
retail channel. Net revenues attributable to the EZ135 system products accounted
for 45% of total net revenues for the quarter ended March 31, 1996. Compared to
the previous year quarter, drive unit shipments were lower by 73% while average
selling prices declined 44%, non EZ system shipments declined 78% while pricing
dropped 46%, and non EZ cartridge shipments declined 47% while average selling
prices declined 11%. This rapid decline in unit shipments and selling prices of
non EZ products was not offset by revenues generated by the EZ135 system and
cartridge products. Unit shipments of combined drive/system products for the
quarter ended March 31, 1996 were flat compared to the comparable year-ago
quarter, yet drive/systems net revenues declined significantly as 71% of the
units shipped during the current year quarter were lower priced EZ135 systems.
For the six month period ended March 31, 1996, net revenues decreased by 11% or
$16.3 million from the comparable six month period in fiscal 1995. The decline
in net revenues was attributable to lower shipment volumes and declining selling
prices of the Company's' non EZ drive and cartridge products. Drive revenues
declined 68%, non EZ system revenues were down 54%, and non EZ cartridge
revenues declined 36%. The decline in net revenues of non EZ products for this
period was not offset by EZ135 product revenues.
The gross loss for the quarter was $25.4 million compared to a gross profit of
$21.5 million in the comparable year ago quarter. The gross margin loss was 54%
in the quarter ended March 31, 1996 compared to a positive gross margin of 28%
in the quarter ended March 31, 1995. The decline in gross profit and gross
margin was due to lower unit shipments and lower average selling prices for core
products, such as the SQ5200 and SQ3270 drive, system, and cartridge products,
production costs for the EZ135 system products, which were not in production in
the prior year period including EZ135 cartridge manufacturing yield issues which
contributed to higher than anticipated EZ135 production costs. Also contributing
to the gross profit decline was the overall shift in revenues from profitable
core product drives and systems to the unprofitable EZ135 system
<PAGE>
products. Additionally, the Company established a $15.9 million reserve for
excess and obsolete inventory and non-cancelable purchase commitments.
In view of rapidly declining unit shipments and selling prices of its core drive
products coupled with the planned release of the next generation EZ product the
Company has re-evaluated its product demand through the remainder of fiscal
1996. The Company concluded that the next generation of the EZ product, which
the Company believes will be released shortly, could render the EZ135 product
and SQ3270 drive and system products obsolete by fiscal year end. As such, the
Company established reserves of $12.8 million for excess inventories and
non-cancelable purchase commitments for its 3 1/2 inch drive and system
products. In addition, the Company provided $3.1 million in reserves for
inventory and tooling due to discontinuance of further development of the
Company's smaller form factor products. The Company believes that there is
sufficient market demand for the SQ5200 drive product and that an excess
inventory reserve is not required.
The gross loss for the six month period ended March 31, 1996 was $34.7 million
compared to a gross profit of $37.4 million for the six month period ended March
31, 1995. The decline in gross profit was due to declining selling prices and
unit shipment volumes of core drive and system products, EZ135 cartridge
manufacturing yield issues, and the shift in revenues from higher profit drive
products to the unprofitable EZ135 system products. In addition to the charges
incurred in the second quarter, previously discussed, in the first quarter of
fiscal 1996, the Company provided a $7.8 million reserve for losses on purchase
commitments and a reserve of $8.6 million for excess inventories.
The reserves discussed above are based on Company estimates of future market
requirements. However, there can be no assurances that Company forecasts will be
achieved and that subsequent inventory write-downs will not be required.
During the second quarter the Company refined and began implementation of its
restructuring plan which was announced early in the second quarter. Reserves of
$3.6 million were established in the second quarter to provide for the write-off
of fixed assets as well as severance compensation and other benefits for the
approximately 1,500 employees affected by the restructuring. The restructuring
plan calls for the closure of the Company's manufacturing facilities in
Singapore which is currently underway with completion scheduled to occur in the
third fiscal quarter. The Company is negotiating for the outsourcing of a
portion of the Company's products with several potential manufacturing partners.
Though there are no definitive agreements in place, one manufacturer is already
supplying product to the Company. The Company presently anticipates that these
manufacturing relationships will be finalized within the current fiscal year.
<PAGE>
Research and development expenses for the quarter ended March 31, 1996 were $7.4
million, an increase of $1.3 million or 21% from the $6.1 million reported in
the comparable year-ago quarter. For the six month period ended March 31, 1996
research and development expenses were $14.5 million compared to $11.3 million
for the comparable period ended March 31, 1995. The increase in expense was
attributable to development activities related to the next generation of the EZ
product and the higher capacity product under development.
Selling, general, and administrative expenses were $14.4 million for the quarter
ended March 31, 1996 an increase of $3.5 million when compared to the $10.8
million reported for the quarter ended March 31, 1995. The increase was
principally attributable to increased bad debt provisions of $2.0 million taken
in the second quarter and operational expenses of the European regional
headquarters in the Netherlands, which became operational October 1, 1995.
Selling, general, and administrative expenses were $28.9 million for the six
month period ended March 31, 1996 an increase of $9.4 million when compared to
the $19.4 million reported for the six month period ended March 31, 1995. The
increase in expenses were primarily attributable to operational expenses of the
European regional headquarters in the Netherlands, which became operational
October 1, 1995, higher sales and marketing expenses associated with the retail
distribution of the EZ135 product, and increased bad debt provisions.
Net interest expense was $403,000 for the quarter ended March 31, 1996 versus
net interest income of $311,000 for the comparable year-ago quarter. The Company
incurred $444,000 of interest expense on its line of credit borrowings in the
second fiscal quarter and earned $41,000 of interest income on its investments.
The Company had no interest expense in the comparable year-ago quarter as there
were no borrowings under the Company's line of credit, and the Company earned
$311,000 on its investments.
No income tax benefit was recorded for the quarter ended March 31, 1996 because
the Company anticipates that deferred tax assets attributed to temporary items
and tax net operating losses arising during fiscal 1996 will be fully offset by
a deferred tax asset valuation allowance. For the six month period ended March
31, 1996, the Company has recorded a $3.0 million provision for income taxes
resulting from an increase in the deferred tax valuation allowance in the first
quarter. The Company recorded a provision for income taxes for the three and six
month periods ended March 31, 1995 at an effective rate of 24%. The effective
tax rate was less than the statutory rate primarily because operating income of
certain foreign operations was not
<PAGE>
subject to foreign income taxes and a portion of such operating income was
considered to be permanently invested in non-U.S. operations.
Liquidity and Capital Resources:
At March 31, 1996 the Company had cash and short-term investments of $7.7
million, a decrease of $21.9 million compared to $29.6 million at September 30,
1995. Borrowings under the Company's line of credit amounted to $17.5 million at
March 31, 1996. There were no borrowings outstanding at September 30, 1995.
Accounts receivable totaled $42.9 million at March 31, 1996, a decline of $12.8
million from September 30, 1995. The decline in accounts receivable was due
primarily to lower sales for the second quarter. Accounts receivable represent
106 days sales outstanding, an increase of 43 days when compared to the quarter
ended December 31, 1995. This reflects a continuing shift in the customer base
towards the slower paying retail channel.
Inventories increased from September 30, 1995 levels by $5.9 million and totaled
$40.1 million at March 31, 1996. The increase in inventory was attributable to
the lower than anticipated sales levels in the second fiscal quarter which
resulted in a significant increase in finished goods.
At March 31, 1996 the Company had a line of credit agreement (the "Agreement")
with a financial institution, expiring January 31, 1997. Borrowings under the
Agreement bear interest at the highest "LIBOR" (the one-month London Interbank
Offered Rates) rate during the month plus 4.825% and are subject to the higher
of a minimum interest rate of 8% per annum or $10,000 per month, regardless of
borrowings. The total borrowings are limited to the lesser of $30 million or 75
percent of the Company's eligible accounts receivable. The Agreement places
limitations on additional borrowings and payment of dividends. As of March 31,
1996, approximately $17.5 million of borrowings were outstanding and
approximately $3.0 million was available for borrowing under the Agreement.
In March 1996, the Company entered into a line of credit agreement with a bank
in Penang, Malaysia. The line of credit provides for a term loan equivalent to
approximately US$ 4.2 million and an overdraft facility of approximately
US$840,000. The term loan is repayable in 120 monthly installments and bears
interest at the rate of 1.5% over the bank's base lending rate. The line of
credit is secured by factory buildings owned by SyQuest Technology (M) SDN BHD.
<PAGE>
As of March 31, 1996 there were no borrowings outstanding under this line of
credit agreement.
The Company continues to rely on its borrowing capabilities in order to fund its
cash requirements for operations although borrowings have typically approached
the limit of available borrowings set by the receivable base. The Company is
negotiating with several outsourcing partners who may provide manufacturing or
other financial support. The Company continues to receive the understanding of
many of its major suppliers as it completes the product transitions currently in
process and its relationship with its bank, and its line of credit, remain in
place. Additionally, the Company has engaged the investment banking firm of
Needham & Company to assist in identifying potential strategic partners and
sources of debt and equity financing.
The Company believes that together with its borrowing capabilities, the
successful completion of outsourcing strategies and the continued support of its
major vendors that it will have the necessary liquidity to complete the product
transitions currently in process.
Factors That May Affect Future Results, Financial Condition and Liquidity:
SyQuest operates in a rapidly changing environment that involves a number of
risks, some of which are beyond the Company's control. The following discussion
highlights some of those risks.
FUTURE DEMAND FOR PRODUCTS
While the Company believes there is sufficient market demand for the SQ5200
drive product and that an excess inventory reserve is not required, there are a
number of risks associated with assessing demand for the SQ5200. First, as
previously stated, reserves are based on estimates of future market requirements
and there can be no assurance that the Company's forecast will be achieved and
that subsequent write-downs will not be required. Second, there are no
assurances that competition will not result in significant additional
discounting or reduced demand for the SQ5200. Third, introduction of new
products, either by the Company or its competitors, may reduce demand sooner
than expected for the SQ5200.
In addition, while the Company believes that the next generation of the EZ
product could render the EZ135 product and the SQ3270 obsolete by fiscal year
end, there can be no assurances that the Company's forecasts for sales of those
<PAGE>
products will be achieved and that subsequent inventory write-downs will not be
required during or after the fiscal year.
OUTSOURCING OF MANUFACTURING
The Company is negotiating for the outsourcing of a portion of the Company's
products with several strategic manufacturing partners and anticipates that
these manufacturing relationships will be consummated within this fiscal year.
Since these agreements are subject to complex negotiations, there can be no
assurances that the Company will reach agreements on their material terms.
There can be no assurances if the negotiations are successful that the third
party manufacturers will be able to supply sufficient quantities of quality
products on a timely basis. The inability to obtain quality products on a timely
basis could have a material adverse effect on the Company's results of
operations and financial condition.
NEW PRODUCT INTRODUCTION
While the Company believes that it will be able to introduce new products
successfully and in a timely manner, inability to successfully introduce new
products in a timely manner may have a material adverse impact on the Company's
results of operations and financial condition. Additionally there can be no
assurances that the competitive environment in which the Company operates will
allow the Company to achieve its objectives with respect to sale of new products
at the Company's anticipated selling prices.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named as a defendant in two putative class action lawsuits.
The action entitled Irving Ravens, et al. v. Syed H. Iftikar, et al. was filed
on April 2, 1996 in the United States District Court for the Northern District
of California (the "Federal Lawsuit"). The action entitled Gary S. Kaufman v.
SyQuest Technology Inc. et al. was filed on March 25, 1996 in the Superior Court
of the State of California for the County of Alameda (the "State Lawsuit").
Certain current and former executive officers and directors of the Company are
also named as defendants in the lawsuit. The plaintiffs in the Federal Lawsuit
purport to represent a class of all persons who purchased the Company's common
stock between October 21, 1994 and February 1, 1996. The complaint in the
Federal Lawsuit alleges that the defendants violated the federal securities laws
through material misrepresentations and omissions. The plaintiffs in the State
Lawsuit purport to represent a class of all persons who purchased common stock
between May 2, 1995 and February 2, 1996. The complaint in the State Lawsuit
alleges that defendants violated various California laws and statutes through
material misrepresentations and omissions. On May 14 1996, the Company was
served with a shareholder's derivative action filed in Alameda County,
California, Superior Court entitled John Nitti, et al v. Syed Iftikar, et al.
The action seeks to recover unspecified damages and punitive damages on behalf
of the Company from current and former officers and directors of the Company for
alleged breach of fiduciary duty, unjust enrichment and waste of corporate
assets. The Company is a nominal defendant in the action. The Complaint alleges
that the officers and directors issued false and misleading information and sold
shares of the Company's stock at artificially inflated prices. The allegations
are essentially the same as those in the two putative class actions. The Company
intends to defend the cases vigorously.
The Company is involved in other litigation arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate outcome of such matters is not expected to have a material adverse
effect on the Company's results of operations or financial position.
Item 4. Submission of Matters to a Vote of Securities Holders
The Company held its 1996 Annual Meeting of Stockholders on February 28, 1996.
At the Annual Meeting the stockholders elected directors and ratified the
<PAGE>
appointment of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending September 30, 1996. The votes on the foregoing matters were
as follows:
Election of Directors.
Votes for each nominee (each of whom was elected a director)
Total Vote Total Vote
For Withheld
---------- ----------
Syed H. Iftikar 9,096,454 453,444
Robert C. Wilson 9,121,733 428,135
C. Richard Kramlich 9,128,029 421,839
David I. Caplan 9,125,340 424,528
Edward L. Marinaro 9,123,929 425,939
Ratification of Appointment of Auditors
For Against Abstain
--- ------- -------
9,258,510 265,981 25,377
Item 5. Other Information.
The Company accepted the resignation of Robert C. Wilson from its board of
directors. Wilson, a partner of Wilson and Chambers, Inc., a business consulting
firm, had served on the Company's board since 1982.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 11.1 Computation of Earnings per share
b. Reports on Form 8-K
A report on Form 8-K dated January 23, 1996, was filed
reporting an Item 2 event.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYQUEST TECHNOLOGY, INC.
(Registrant)
Date: May 14, 1996 By: /s/ James E. Graber
------------------- ---------------------------
James E. Graber
Vice President Investor Relations &
Acting Vice President, Finance &
Chief Financial Officer
Date: May 14, 1996 By: /s/ Syed H. Iftikar
------------------- ---------------------------
Syed H. Iftikar
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT Sequentially Numbered Page
- ------- --------------------------
Exhibit 11.1 - Computation of Earnings
per share 19
<TABLE>
EXHIBIT 11.1
SYQUEST TECHNOLOGY, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<CAPTION>
Three months ended Six months ended
March 31, (1) March 31, (1)
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) ($51,105) $ 3,686 ($84,906) $ 5,609
======= ======== ======= ========
Common and common equivalent shares outstanding:
Common stock 11,371 11,034 11,351 10,988
Options -- 804 -- 876
------- -------- ------- --------
Common and common equivalent shares
used in computing per share amounts 11,371 11,838 11,351 11,864
======= ======== ======= ========
Net income (loss) per share ($4.49) $ 0.31 ($7.48) $ 0.47
======= ======== ======= ========
<FN>
(1) Primary and fully diluted income (loss) per share are the same for the three
month and six month periods ended March 31, 1996 and March 31, 1995.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 7,673
<SECURITIES> 0
<RECEIVABLES> 42,893
<ALLOWANCES> 0
<INVENTORY> 40,079
<CURRENT-ASSETS> 104,496
<PP&E> 62,544
<DEPRECIATION> 29,274
<TOTAL-ASSETS> 140,778
<CURRENT-LIABILITIES> 133,324
<BONDS> 0
<COMMON> 13
0
0
<OTHER-SE> (1,536)
<TOTAL-LIABILITY-AND-EQUITY> 140,778
<SALES> 47,445
<TOTAL-REVENUES> 47,445
<CGS> 72,836
<TOTAL-COSTS> 72,836
<OTHER-EXPENSES> 25,311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403
<INCOME-PRETAX> (51,105)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51,105)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,105)
<EPS-PRIMARY> (4.49)
<EPS-DILUTED> (4.49)
</TABLE>
